REFILE-US STOCKS-Wall St climbs as healthy GDP data boosts confidence

Fri Dec 20, 2013 10:20am EST

* Red Hat gains after earnings, outlook

* Blackberry up after earlier tumble following results

* Final GDP reading tops expectations

* Indexes up: Dow 0.4 pct, S&P 0.4 pct, Nasdaq 0.46 pct

By Chuck Mikolajczak

NEW YORK, Dec 20 (Reuters) - U.S. stocks climbed on Friday, putting the S&P 500 on pace for its biggest weekly gain in two months, as an unexpectedly strong report on U.S. growth boosted investor confidence that the economy could support a wind-down of Federal Reserve stimulus.

Gross domestic product grew at a 4.1 percent annual rate in the third quarter, the fastest pace in almost two years, and higher than the 3.6 percent pace reported earlier this month. Business spending was also stronger than previously estimated.

"Maybe it's not going to impact the fourth quarter (GDP) but it can certainly lift 2014. The consensus is moving that way, we are looking towards improved economic strength as we move into 2014," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.

"The change is the fact equities are up on this news, maybe even just a month ago they would have been down on this news with the feeling this means the Fed is going to tighten or taper aggressively."

Volume is expected to be active, as investors deal with the last "quadruple witching" day of the year, with the quarterly expiration and settlement of December contracts for stock options, stock index options, stock index futures and single stock futures.

In addition, most U.S. funds will adjust their portfolios as a result of rebalancing by index providers. Credit Suisse expects the rebalancing to result in over $30 billion in total trading at today's close.

On Wednesday, the central bank modestly trimmed the pace of its market-friendly monthly asset purchases, by $10 billion to $75 billion, and suggested its key interest rate would stay at rock bottom longer than previously promised.

The S&P 500 has gained more than 27 percent this year and is on track for its biggest yearly gain since 1997, largely fueled by the Fed's stimulus aimed at boosting the economy.

Fed Chairman Ben Bernanke said if U.S. job gains continue as expected, the bond purchases would likely continue to be cut at a "measured" pace through much of next year, probably being wound down "late in the year, certainly not by the middle of the year."

The Dow Jones industrial average rose 64.66 points, or 0.4 percent, to 16,243.74, the S&P 500 gained 7.19 points, or 0.4 percent, to 1,816.79 and the Nasdaq Composite added 18.688 points, or 0.46 percent, to 4,076.823.

Red Hat Inc jumped 18.8 percent to $58.23 as the best performer on the S&P 500 after the world's largest commercial distributor of the Linux operating system reported third-quarter results above analysts' estimates and raised its full-year forecast.

Blackberry Ltd reported a massive quarterly loss on Friday due to an inventory writedown and asset impairment charges. Still, U.S.-listed shares advanced 1.9 percent to $6.37 after falling more than 7 percent in premarket trade.

Walgreen Co edged up 0.8 percent to $57.41 after the largest U.S. drugstore operator reported higher first-quarter sales.

Oracle Corp dipped 0.02 percent to $36.59 after it said it would buy Responsys Inc in a deal valued at $1.5 billion as the world's No. 2 software maker beefs up its cloud offerings. Responsys shares surged 38.4 percent to $27.02.

Jones Group Inc climbed 4.8 percent to $14.81 after the company said on Thursday it had agreed to be bought by Sycamore Partners for $15 per share, or $1.2 billion.

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